National CineMedia, Inc. Reports Results for Fiscal First Quarter 2018

Announces Quarterly Cash Dividend of $0.17 per Share

Reaffirms Full Year 2018 Outlook

May 07, 2018 07:30 AM Eastern Daylight Time

CENTENNIAL, Colo.--(BUSINESS WIRE)--National CineMedia, Inc. (NASDAQ:NCMI) (the Company), the managing
member and owner of 48.8% of National CineMedia, LLC (NCM LLC), the
operator of the largest in-theater digital media network in North
America, announced today consolidated results for the fiscal first
quarter ended March 29, 2018.

Total revenue for the first quarter ended March 29, 2018 increased 11.5%
to $80.2 million from $71.9 million for the comparable quarter last
year. Operating income increased 115.7% to $11.0 million for the first
quarter of 2018 from $5.1 million for the first quarter of 2017.
Adjusted OIBDA increased 32.4% to $23.3 million for the first quarter of
2018 from $17.6 million for the first quarter of 2017. Included in
Adjusted OIBDA and operating income were $0.4 million and $1.4 million
of non-cash impairment charges during 2018 and 2017, respectively, on
investments obtained in prior years in exchange for advertising
services. Net loss for the first quarter of 2018 was $1.9 million, or
net loss of $0.03 per diluted share, compared to net loss of $1.3
million, or net loss of $0.02 per diluted share, for the first quarter
of 2017. Excluding CEO transition-related costs, net loss for the first
quarter of 2018 and for the first quarter of 2017 would have remained
the same. See the tables at the end of this release for the
reconciliations to the closest GAAP basis measurement.

The Company announced today that its Board of Directors has authorized
the Company’s regular quarterly cash dividend of $0.17 per share of
common stock. The dividend will be paid on June 1, 2018 to stockholders
of record on May 18, 2018. The declaration, payment, timing and amount
of any future dividends payable will be at the sole discretion of the
Board of Directors who will take into account general economic and
advertising market business conditions, the Company’s financial
condition, available cash, current and anticipated cash needs, and any
other factors that the Board of Directors considers relevant. While it
is the intention of the Company to continue its practice of distributing
a substantial proportion of its free cash flow, the Board of Directors
continues to review the factors listed above and others as deemed
relevant to determine a sustainable distribution rate which balances the
operating and strategic needs of the Company with those of its lenders
and stockholders.

Commenting on the Company’s first quarter 2018 operating results, Andy
England, NCM’s CEO said, “It has been an excellent start to 2018, with
first quarter results coming in better than our expectations and second
quarter also off to a good start. We continue to attract new and
returning advertisers, proving that the power of cinema advertising is
alive and well. The launch of the first app in our Noovie digital
ecosystem, NoovieARcade, is bringing interactive
augmented reality gaming to the big screen, enhancing the moviegoing
experience and giving audiences a reason to arrive early to discover
what’s next in entertainment – which is good for both consumers and
brands.”

2018 Outlook

For the full year 2018, the Company reaffirms its outlook of total
revenue to be flat to up 4.5% and Adjusted OIBDA to be down 2.5% to up
4.8% from the full year 2017. The Company expects total revenue in the
range of $425.0 million to $445.0 million for the full year 2018,
compared to total revenue for the full year 2017 of $426.1 million and
Adjusted OIBDA in the range of $200.0 million to $215.0 million for the
full year 2018 compared to Adjusted OIBDA for the full year 2017 of
$205.1 million. During 2018, the Company expects to record approximately
$23.0 million in integration and other encumbered theater payments from
Cinemark and AMC associated with the Rave Theatres and Carmike Theatres
acquisitions, which are recorded as a reduction of an intangible asset.

Supplemental Information

Integration and other encumbered theater payments due from Cinemark and
AMC associated with Rave Theatres and Carmike Theatres for the quarter
ended March 29, 2018 and March 30, 2017 were $2.2 million and $0.4
million, respectively. These payments were recorded as a reduction of an
intangible asset.

Conference Call

The Company will host a conference call and audio webcast with
investors, analysts and other interested parties May 7, 2018 at 8:30
A.M. Eastern Time. The live call can be accessed by dialing
1-877-407-9716 or for international participants 1-201-493-6779.
Participants should register at least 15 minutes prior to the
commencement of the call. Additionally, a live audio webcast will be
available to interested parties at www.ncm.com
under the Investor Relations section. Participants should allow at least
15 minutes prior to the commencement of the call to register, download
and install necessary audio software.

The replay of the conference call will be available until midnight
Eastern time, May 21, 2018, by dialing 1-844-512-2921 or for
international participants 1-412-317-6671, and entering conference ID
13679035.

About National CineMedia, Inc.

National CineMedia (NCM) is America’s Movie Network. As the #1
Millennial weekend network in the U.S., NCM is the connector between
brands and movie audiences. According to Nielsen, more than 700 million
moviegoers annually attend theaters that are currently under contract to
present NCM’s Noovie pre-show in 54 leading national and regional
theater circuits including AMC Entertainment Inc. (NYSE:AMC), Cinemark
Holdings, Inc. (NYSE:CNK) and Regal Entertainment Group. NCM’s cinema
advertising network offers broad reach and unparalleled audience
engagement with over 20,800 screens in over 1,650 theaters in 187
Designated Market Areas® (all of the top 50). NCM Digital goes beyond
the big screen, extending in-theater campaigns into online and mobile
marketing programs to reach entertainment audiences. National CineMedia,
Inc. (NASDAQ:NCMI) owns a 48.8% interest in, and is the managing member
of, National CineMedia, LLC. For more information, visit www.ncm.com.

Forward-Looking Statements

This press release contains various forward-looking statements that
reflect management’s current expectations or beliefs regarding future
events, including statements providing guidance and projections for the
full year 2018. Investors are cautioned that reliance on these
forward-looking statements involves risks and uncertainties. Although
the Company believes that the assumptions used in the forward-looking
statements are reasonable, any of these assumptions could prove to be
inaccurate and, as a result, actual results could differ materially from
those expressed or implied in the forward-looking statements. The
factors that could cause actual results to differ materially from those
expressed or implied in the forward-looking statements are, among
others, 1) level of theater attendance or viewership of the Noovie
Pre-show; 2) increased competition for advertising expenditures; 3)
changes to relationships with NCM LLC’s founding members; 4) inability
to implement or achieve new revenue opportunities; 5) technological
changes and innovations; 6) economic conditions, including the level of
expenditures on cinema advertising; 7) our ability to renew or replace
expiring advertising and content contracts; 8) our need for additional
funding, risks and uncertainties relating to our significant
indebtedness; 9) reinvestment in our network and product offerings may
require significant funding and resulting reallocation of resources; 10)
fluctuations in operating costs; and 11) changes in interest rates. In
addition, the outlook provided does not include the impact of any future
unusual or infrequent transactions; sales and acquisitions of operating
assets and investments; any future noncash impairments of intangible and
fixed assets; amounts related to litigation or the related impact of
taxes that may occur from time to time due to management decisions and
changing business circumstances. The Company is currently unable to
forecast precisely the timing and/or magnitude of any such amounts or
events. Please refer to the Company’s Securities and Exchange Commission
filings, including the “Risk Factor” section of the Company’s Annual
Report on Form 10-K for the year ended December 28, 2017, for further
information about these and other risks. Investors are cautioned not to
place undue reliance on any such forward-looking statements, which speak
only as of the date they are made. The Company undertakes no obligation
to update any forward-looking statement, whether as a result, of new
information, future events or otherwise, except as required by law.

NATIONAL CINEMEDIA, INC.Condensed Consolidated
Statements of IncomeUnaudited($ in
millions, except per share data)

Quarter Ended

March 29,2018

March 30,2017

Revenue (including revenue from founding members of

$8.0 and $8.4, respectively)

$

80.2

$

71.9

OPERATING EXPENSES:

Advertising operating costs

7.0

5.0

Network costs

3.5

4.2

Theater access fees—founding members

20.6

20.6

Selling and marketing costs

16.0

18.1

Administrative and other costs

12.6

9.3

Depreciation and amortization

9.5

9.6

Total

69.2

66.8

OPERATING INCOME

11.0

5.1

NON-OPERATING EXPENSES:

Interest on borrowings

13.8

13.2

Interest income

(0.2

)

(0.4

)

Gain on re-measurement of the payable to

founding members under the tax receivable

agreement (1)

(0.1

)

—

Other non-operating income

—

(0.1

)

Total

13.5

12.7

LOSS BEFORE INCOME TAXES (1)

(2.5

)

(7.6

)

Income tax expense (benefit) (1)

1.0

(1.8

)

CONSOLIDATED NET LOSS (1)

(3.5

)

(5.8

)

Less: Net loss attributable to noncontrolling

interests

(1.6

)

(4.5

)

NET LOSS ATTRIBUTABLE TO

NCM, INC. (1)

$

(1.9

)

$

(1.3

)

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic

76,640,414

60,309,087

Diluted

76,640,414

60,309,087

NET LOSS PER NCM, INC. COMMON SHARE: (1)

Basic

$

(0.03

)

$

(0.02

)

Diluted

$

(0.03

)

$

(0.02

)

Dividends declared per common share

$

0.17

$

0.22

(1)

These 2017 balances have been adjusted to reflect 1) the change in
accounting principle adopted in the first quarter of 2018 and
applied retrospectively to all prior periods related to the
presentation of the Company’s payable to founding members under the
tax receivable agreement whereby the Company is no longer
discounting the payable and 2) the correction of prior period errors
related to these accounts. These changes resulted in a $0.06
increase in diluted earnings per share for the three months ended
March 30, 2017. Refer to the Company’s Form 10-Q for the quarter
ended March 29, 2018, expected to be filed with the SEC on May 8,
2018, for further discussion of the nature and amount of the changes.

These 2017 balances have been adjusted to reflect the change in
accounting principle adopted in the first quarter of 2018 and
applied retrospectively to all prior periods related to the
presentation of the Company’s payable to founding members under the
tax receivable agreement, deferred tax assets and liabilities, APIC
and retained earnings as the Company is no longer discounting the
payable. Refer to the Company’s Form 10-Q for the quarter ended
March 29, 2018, expected to be filed with the SEC on May 8, 2018,
for further discussion of the nature and amount of the change.

NATIONAL CINEMEDIA, INC.Operating DataUnaudited

Quarter Ended

March 29, 2018

March 30, 2017

Total Screens (100% Digital) at Period End (1)(6)

20,802

20,505

Founding Member Screens at Period End (2)(6)

16,787

16,396

DCN (Digital Content Network) Screens at Period End (3)(6)

20,416

19,937

Quarter Ended

(in millions)

March 29,

2018

March 30,

2017

Total Attendance for Period (4)(6)

177.0

181.5

Founding Member Attendance for Period (5)(6)

147.0

153.3

Capital Expenditures

$

3.5

$

3.0

(1)

Represents the total screens within NCM LLC’s advertising network.

(2)

Represents the total founding member screens.

(3)

Represents the total number of screens that are connected to the
Digital Content Network.

(4)

Represents the total attendance within NCM LLC’s advertising network.

(5)

Represents the total attendance within NCM LLC’s advertising network
in theaters operated by the founding members.

OIBDA, Adjusted OIBDA, Adjusted OIBDA margin and adjusted income per
share are not financial measures calculated in accordance with GAAP
in the United States. See attached tables for the non-GAAP
reconciliations.

NATIONAL CINEMEDIA, INC.Non-GAAP ReconciliationsUnaudited

OIBDA, Adjusted OIBDA and Adjusted OIBDA Margin

Operating Income Before Depreciation and Amortization (“OIBDA”),
Adjusted OIBDA and Adjusted OIBDA margin are not financial measures
calculated in accordance with GAAP in the United States. OIBDA
represents operating income before depreciation and amortization
expense. Adjusted OIBDA excludes from OIBDA non-cash share based
compensation cost and Chief Executive Officer transition costs. Adjusted
OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue.
Our management uses these non-GAAP financial measures to evaluate
operating performance, to forecast future results and as a basis for
compensation. The Company believes these are important supplemental
measures of operating performance because they eliminate items that have
less bearing on its operating performance and so highlight trends in its
core business that may not otherwise be apparent when relying solely on
GAAP financial measures. The Company believes the presentation of these
measures is relevant and useful for investors because it enables them to
view performance in a manner similar to the method used by the Company’s
management, helps improve their ability to understand the Company’s
operating performance and makes it easier to compare the Company’s
results with other companies that may have different depreciation and
amortization policies, non-cash share based compensation programs, CEO
turnover, interest rates, debt levels or income tax rates. A limitation
of these measures, however, is that they exclude depreciation and
amortization, which represent a proxy for the periodic costs of certain
capitalized tangible and intangible assets used in generating revenues
in the Company’s business. In addition, Adjusted OIBDA has the
limitation of not reflecting the effect of the Company’s share based
payment costs or costs associated with the resignation of the company’s
former Chief Executive Officer. OIBDA or Adjusted OIBDA should not be
regarded as an alternative to operating income, net income or as
indicators of operating performance, nor should they be considered in
isolation of, or as substitutes for financial measures prepared in
accordance with GAAP. The Company believes that operating income is the
most directly comparable GAAP financial measure to OIBDA. Because not
all companies use identical calculations, these non-GAAP presentations
may not be comparable to other similarly titled measures of other
companies, or calculations in the Company’s debt agreement.

The following tables reconcile operating income to OIBDA and Adjusted
OIBDA for the periods presented (dollars in millions):

Quarter Ended

March 29,2018

March 30,2017

Operating income

$

11.0

$

5.1

Depreciation and amortization

9.5

9.6

OIBDA

$

20.5

$

14.7

Share-based compensation costs (1)

2.8

2.7

CEO transition costs (2)

—

0.2

Adjusted OIBDA

$

23.3

$

17.6

Total revenue

$

80.2

$

71.9

Adjusted OIBDA margin

29.1

%

24.5

%

Adjusted OIBDA

$

23.3

$

17.6

Carmike and Rave Theatres integration

and other encumbered theater payments accrued

2.2

0.4

Adjusted OIBDA after integration and

other encumbered theater payments

$

25.5

$

18.0

(1)

Share-based compensation costs are included in network operations,
selling and marketing and administrative expense in the accompanying
financial tables as shown in the following table (dollars in
millions).

March 29,2018

March 30,2017

Share-based compensation costs included in

network costs

$

0.2

$

0.3

Share-based compensation costs included in

selling and marketing costs

1.0

0.9

Share-based compensation costs included in

administrative and other costs

1.6

1.5

Total share-based compensation costs

$

2.8

$

2.7

(2)

Chief Executive Officer transition costs represent consulting,
relocation and other costs and are included in administrative
expense in the accompanying financial tables.

Outlook (in millions)

Year EndingDecember 27, 2018

NCM, Inc.

Low

High

Operating income

$

156.0

$

163.0

Depreciation and amortization

36.0

40.0

OIBDA

192.0

203.0

Share-based compensation costs (1)

8.0

12.0

Adjusted OIBDA

$

200.0

$

215.0

Total revenue

$

425.0

$

445.0

(1)

Share-based compensation costs are included in network operations,
selling and marketing and administrative expense in the accompanying
financial tables.

Adjusted Net Loss and Loss per Share

Adjusted net loss and loss per share are not financial measures
calculated in accordance with GAAP in the United States. Adjusted net
loss and loss per share are calculated using reported net loss and loss
per share and exclude CEO transition-related costs. Our management uses
these non-GAAP financial measures as an additional tool to evaluate
operating performance. The Company believes these are important
supplemental measures of operating performance because they eliminate
items that have less bearing on its operating performance and so
highlight trends in its core business that may not otherwise be apparent
when relying solely on GAAP financial measures. The Company believes the
presentation of these measures is relevant and useful for investors
because it enables them to view performance in a manner similar to a
method used by the Company’s management and helps improve their ability
to understand the Company’s operating performance. Adjusted net income
should not be regarded as an alternative to net income and should not be
regarded as an alternative to income per share or as indicators of
operating performance, nor should they be considered in isolation of, or
as substitutes for financial measures prepared in accordance with GAAP.
The Company believes that net income and income per share are the most
directly comparable GAAP financial measures. Because not all companies
use identical calculations, these presentations may not be comparable to
other similarly titled measures of other companies.

The following table reconciles net income as previously reported to net
income as reported reflecting the impact of the change in accounting
principle. In addition, as reported net income and income per share are
reconciled to adjusted net income and income per share excluding the CEO
transition-related costs for the periods presented (dollars in millions):

Quarter Ended

March 29,2018

March 30,2017

Net loss as previously reported

$

—

$

(5.0

)

Adjustment due to change in accounting principle and

correction of prior period error

—

3.7

Net loss as reported

$

(1.9

)

$

(1.3

)

CEO transition costs (1)

—

0.2

Effect of noncontrolling interests (51.2% and

60.7%, respectively)

—

(0.1

)

Effect of provision for income taxes (88%

and 38% effective rate, respectively)

—

—

Net effect of adjusting items

—

0.1

Diluted net loss excluding adjusting items

$

(1.9

)

$

(1.2

)

Weighted Average Shares Outstanding as reported

and as adjusted

Diluted

76,640,414

60,309,087

Diluted loss per share as reported (2)

$

(0.03

)

$

(0.02

)

Net effect of adjusting items

—

—

Diluted loss per share excluding adjusting

items

$

(0.03

)

$

(0.02

)

(1)

Chief Executive Officer transition costs represent consulting,
relocation and other costs and are included in administrative
expense in the accompanying financial tables.

(2)

The impact of the change in accounting principle and correction of a
prior period error was an increase of $0.06 to diluted earnings per
share for the three months ended March 30, 2017.